Benefits of PCB Reshoring
There have been several benefits to using offshore printed circuit board manufacturing partners throughout the years, but times are changing. Numerous electronics OEMs have seen significant benefits from reshoring their PCB manufacturing to domestic facilities. Historically, offshore PCB manufacturing has given OEMs cheap labor costs, making it an appealing choice despite the distance. This paradigm, however, has shifted in favor of local production as of late.
Manufacturing technological advancements have reduced the amount of physical labor necessary for PCB manufacturing. Additionally, countries with reduced labor costs have seen economic progress and success resulting in an increase of that labor cost. This higher labor expense is then passed onto the OEMs. However, labor costs are just one aspect of this tale, and in this blog post, we will look at the advantages of reshoring PCB and PCB assembly production.
Better Lead Times and Proximity Factor
In an era where delivery times are defined in hours rather than days, manufacturers are under great pressure to satisfy orders at a rate that was previously unheard of.
Customers may now make an order on Amazon late at night and expect their product to be delivered the following day. This technology has bred a consumer class that is used to obtaining their needs promptly and without any discernible wait.
Simply by virtue of location, reshoring enables manufacturers to avoid expensive delays that frustrate their consumers. When commodities travel a shorter distance before reaching a distributor, the likelihood of encountering issues is reduced. Additionally, shorter lead times aid in the acceleration of the sales process and allow more precise forecasting of when orders may be completed and items delivered.
Prices may vary with offshore production due to events that are out of an OEM’s control. This includes varying tariffs on exports as well as offshore manufacturers sporadically increasing pricing. These fluctuating rates might come as a surprise and cause challenges for production budgets.
Businesses have reported unexpected tariffs being applied to their shipping expenses, significantly reducing their profit margins.
Certain suppliers have increased their minimum order sizes in response to the epidemic, leaving firms with surplus inventory they don’t want or need.
America’s protracted trade battle with China has resulted in huge fluctuations in the price of specific items, making it difficult for businesses to budget and price their products appropriately.
Reshoring provides much more stability and the opportunity to avoid the sort of uncertainty that costs businesses time, money, and reputation.
Improved Supply Chain and Procurement
Reshoring in the United States puts production closer to a company’s end user. As a result, less fossil fuels are required to transport said goods resulting in less pollution for the environment. Additionally, shorter supply chains reduce excessive overproduction. This allows for just in time manufacturing (JIT) and improved cash flows. Manufacturers can quickly react to swings in client demand without contacting offshore partners or navigating complex international shipping procedures.
Domestic supply chains that can operate lean save both money and the environment. For instance, as Marc Onetto, a former senior vice president of Amazon, notes, toy producers never fully know which goods will be popular throughout the Christmas season until Black Friday. OEMs may assess product sales on Black Friday and immediately replace inventories of popular toys, avoiding discounting or eventually squandering undesirable items. This principle carries over to the electronics industry as well.
No Language or Cultural Barriers
Often when working with overseas manufacturers, one may have to deal with time and language barriers. Prompt communication is key in a successful project and often times designs must change in an instant. Having to wait for your assembly partner to wake up reduces your ability to have quick back and forth conversations that lead to a successful project. Speaking the same language as your manufacturing partner also decreases the probability of communication errors.
Intellectual Property Protection
Working with Chinese enterprises poses distinct hurdles that outweigh any financial benefits manufacturers may obtain from outsourcing their supply chain.
The fear of intellectual property theft has long lingered over certain US corporations’ interactions with Chinese partners. According to the US State Department, Chinese intellectual property theft costs American firms between $200 billion and $600 billion each year.
Even when a trusting connection exists, commodities originating in China may meet unanticipated customs difficulties, resulting in severe delays.
Solar’s Rise in the United States
Government incentives such as federal tax credits encourage American firms to become more ecologically sustainable. Through 2019, the Solar Investment Tax Credit (ITC) offers solar energy system owners with a 30% discount on panel installations with no value limit, an incentive that has aided the solar industry’s compound annual growth rate of more than 60% over the previous decade. Solar energy not only saves manufacturers money on energy bills, but it also protects the environment from the harmful pollutants produced by fossil fuels. According to the Solar Energy Industries Association (SEIA), corporate solar systems in the United States now offset roughly 11 million metric tons of yearly carbon dioxide emissions.
Cost Increases Overseas
Offshore manufacturing has long taken advantage of cheap labor to push costs down to a point where domestic firms struggle to compete. However, a number of factors have coalesced to lessen the pay disparity between abroad and domestic employees in North America.
Over the previous decade, China has experienced a steady growth in worker earnings. Hourly manufacturing labor expenditures in China climbed to $5.51 USD in 2018, over a dollar more than in Mexico.
Additionally, the continuing epidemic has reduced the number of Chinese employees willing to risk their health by returning to work. To entice employees back to their factory floors, China’s manufacturers have been obliged to boost pay by $1,500 USD per month, an increase that has been passed on straight to firms at the other end of the supply chain.
Transport expenses have also increased significantly in recent years. At the moment, the average cost of carrying a cargo container from China to California is over $3,000, far more than the cost of transporting products anyplace else in North America. Reshoring eliminates these high-cost shipping expenses, resulting in huge cost reductions.
Significantly Reducing Shipping Issues
One of the most significant risks associated with offshore manufacturing and the whole PCB supply chain is returning the finished project to the OEM. Shipping prices and customs are spiralling out of control, exacerbated by congested ports and shipping routes. On the other hand, items manufactured in the United States will avoid the worst of these transportation issues. Shipping locally manufactured circuit boards might sometimes be as easy as driving them across town.
Sleep Easy, Reshore Your Manufacturing Processes
While reshoring doesn’t mean there will never be issues, it does eliminate a lot of weak points in your supply chain. Offshore manufacturing tends to have many more unexpected issues. These problems may be as simple as overseas national holidays or could be as extreme as overseas political turmoil that can influence labor availability and cost. Let’s not forget the ongoing global emergency (COVID-19 pandemic) that can hinder offshore manufacturing and shipping. Utilizing local PCB assembly shops eliminates most of those problems, and even during the first pandemic shutdown, most electronics manufacturing was considered essential and were allowed to continue operations.
Local PCB Assembly
Vinatronic has been helping OEMs move their manufacturing stateside for over 25yrs. Especially the last few years, more and more companies have been interested in how they can improve their supply chain operations. If you need an industry trusted PCB and PCB assembly manufacturing partner, please reach out to our team. We build our circuit boards out of Huntington Beach, California and serve a large number of Southern Californian companies.